Monday, February 24, 2014


Has anyone experienced being sold a Financial or Investment product which actually is not meant for you?, reason being-

It does not help you financially satisfy your goal, i.e. under or over shoots your requirement?  (of course, if you know your actual requirement)


The maturity does not match to your goal year?


The Product itself is not for you?


The product gives very high or very low returns?


Product is such that, regular re balancing is very much necessary?


The product was good for my friend or colleague, but not for me?

I bet on this, everyone has experienced or is experiencing few of the above…….
Has anyone asked you what is your family’s requirement? And assessed the same with you ?

Following are the reasons why Financial Planning becomes eminent for individual family (as each family has their own goals and dreams)-

Contrary to popular belief, Financial Planning is not just investing its a process and all about how to set and move on with it and finally achieving Financial Freedom-the ultimate Nirvana.-

** Family Income recording and assessment

Each family has an income and lot of people within family say “I have this income”,-this needs to be consolidated as family income and recorded as per different point of time and level of receipts, from time to time. This would actually show what is the income available.( believe me most don’t even know what is there actual family income) Recording income also helps manage it.

** Family Expense recording and understanding cash flow

More the number of people in the family more the hands to incur expenses and with that comes more the difficulty to record , evaluate and control it, but sitting once together would help all get actual picture (Believe me, doing this by yourself also will help family a lot)

Actually with each member of family having a very busy schedule, there is lack of communication, which results into unnecessary expenses and even may create a credit hole for the family (even when the family is small and even when only few members in family are actively earning)

Income and Expenses may generally differ as per periods and needs respectively, but once a record of the same is done you know what is the surplus available at that particular point of time on an average history basis which helps a family take any financial decision, may be  for spending or saving

So this may help the family increase cash flow, plan tax payments and even plan for expenses. This may  in turn increase cash flow.Increase in Cash Flow may also help increase Capital.

** Recording current assets, liabilities and investments held and assessing the same

This is the most under-rated activity by any family as no collation is done of the same. Most of the times it is actually a very “Truth Bearing” activity. Most family’s just invest and then no records are kept, not even tracked where it is.

I had this one prospect who said ”I have partnership business assets like plot, plant and machinery etc , which will take care of my retirement “ and I felt pity for the family ‘cause those assets were never valued ( keep aside his retirement needs assessment). So being under some assumption is like digging a hole in once own pocket ( “and we say there are lot of pick-pocketer’s around ”)

So it is very much necessary to record all assets, investments and liabilities at one place and collate them, assess them and value them. Moreover each asset and liability class has its own different time and money value characteristic.

** Assessing Family security needs

This is very very important.
While we all must have some or the other risk avoiding or risk averting method or investments, has anyone actually assessed the Risk Attached with the Family? Financial Planning will aptly guide the family for the same, and provide peace of mind which in turn increases productivity and concentration.

** Helps in Investment needs analysis

What are goals for the family and what are its needs to invest today to achieve those goals, which falls at different point of time; needs to be assessed, but doing above activity will give definite clarity for the family individually.

** Standard of living

Once income and expenses are recorded, it will help the family to understand whether same standard of living can be maintained or it can be / needs to be upgraded.

** Financial advisor role, with Financial plan as base

It is very important to have a financial consultant, such that he not only is good in technicals and calculations but also has emotional and intuitive understanding of people, situations and markets. Such a person will help you in the following with help of Financial Plan-

 - Creating a vision for the family, through individualistic Financial Plan preparation
 - Laying a path to achieve the vision created
 - Following a set process, thereby keeping emotions and market conditions at bay as far as investment decisions are to be taken.
- Preparation of Plan as per individual Portfolio Allocation and Risk profiling of the family.
- Reminding and re-affirming of Family Goals and requirements, if anytime member waives away from the Plan

** Re balancing the investments from time to time regularly

Market conditions change from time to time and accordingly investments would also change. So Financial Advisor/ Planner  would help the family on regular basis to rebalance the portfolio as per family needs. So here, each family would have its own unique rebalancing requirement-and that can be done only by experienced Financial Advisor with the spiritual book-your Financial Plan in hand.

** Disciplined approach

Once a Financial Plan of the family is written, it becomes a spiritual book for the family and gives a very clear thinking approach, hence it helps the family to think in a direction and hence disciplines the family.

Better financial understanding is achieved when all financials are measured-like each goals are measured, its financial needs to achieve is measured, investments are measured and effects of decisions taken and reviews done are better understood.Each financial aspect measurement capability is met with pros and cons of those decisions and situations..

Actually this approach also inculcates a better and disciplined habit in younger family members towards Financial Planning, and it is always advantageous to have this understanding at a early age. ( for more clarity read- " SAVE NOW or PAY LATER" )

** Actually creating value for money

Emotions generally affects any investment at 3 levels viz, market level, investor level and advisor level and each will play its role at some point or time to make financial decisions.

But when a Financial Plan is written and which well articulates the habits of the family, a discipline is set which would always help the family take worthwhile decisions, in turn create value for money in its real sense.

** Financial Plan helps stick to goals and prioritise as per actual needs

We have, what we call responsibilities and duties towards family members, have goals, have dreams and aspirations. Who will help the family understand these things and make realise the family what and where is the difference? For each family a dream and a goal would be differently defined and so the needs and wants would be accordingly prioritised and so sticking to goals becomes a habit.

So now you have a single person-called Financial Consultant / Advisor who actually knows your family’s needs in and out and is point of contact for every financial need or query or situation-Plus you have an added advantage to have a consolidated Financial Statement at one go rather than calling 10 different agents who don’t’ know you in and out, your family resources, needs and goals.

" In Short to Sum-Up, a financial plan offers to help family clear their hazy and cloudy thoughts and ideas AND think and act in same direction in a Disciplined manner."

Financial Planning basically-with the help of a financial advisor- should help in 3 ways, Understanding current Financial Situation, Evaluating where you want to go (i.e.goals and measuring the goals) and lastly setting a process to achieve those goals, with a wholesome approach.

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